WHAT ARE WE LOOKING FOR? Good dividend stocks south of the border. We'll use Sherry's Cooper's dividend screen for U.S. stocks this time.
MORE ABOUT TODAY'S SCREEN Ms. Cooper is the global economic strategist for BMO Financial Group. In her book, The New Retirement: How It Will Change Our Future, Ms. Cooper lays out a conservative dividend screen that requires a company to have a dividend yield of more than 2.5 per cent and a five-year dividend growth rate of more than 10 per cent.
To emphasize dividend safety and to reduce risk, the payout ratio (dividends divided by earnings) has to be less than 60 per cent and the beta (a measure of a stock's volatility in relation to the market) has to be less than 1. Companies also must have a positive 10-year trend in pre-tax profit margins.
WHAT DID WE FIND OUT? When we did this screen for Canadian stocks yesterday, we had to increase the payout ratio to 70 per cent and the beta to 1.2 to get a decent-sized list of stocks. We didn't have to do this for U.S. stocks.
A few of these stocks are also members of the S&P dividend aristocrats index, which means they've increased dividends for at least 25 years. These include Chubb, McDonald's, PepsiCo and Procter & Gamble.